September 9, 2023

Recently, there has been debate on the question of whether Pakistan will default on its debt. To properly address this issue, it is necessary for us to look into the current debt levels and assess how it has been accumulated over time.Pakistan’s financial story is incomplete without an analysis of its debt. 

Since its independence in 1947, the country has had to rely on external financial assistance. To gain a thorough understanding of Pakistan’s debt-related issues and how they have come about, it is important to consider the various policy interventions that have led to a debt accumulation and how certain groups have used their influence to create a situation of debt.

At the time of Partition, both India and Pakistan faced economic difficulties. Pakistan inherited 17 percent of colonial India’s revenue and 33 percent of its army. This inheritance subsequently shaped the budgetary priorities of the many governments that followed.

Despite sharing some economic experiences with India, Pakistan has been unable to escape the debt trap since its first International Monetary Fund (IMF) programme in 1958. With a total of 22 IMF programmes, Pakistan has remained under the influence of the multilateral lender for most of its independent life. In comparison, India and Bangladesh have accessed the IMF only seven and ten times respectively.

How We Got Here?

Pakistan has faced a debt burden since its first IMF program in 1958, a reality shared with India but to a lesser extent. With 22 programmes, Pakistan has been under the influence of the IMF for most of its independent life, compared to India and Bangladesh which have only accessed the IMF seven and ten times respectively.